Good day Tutor, kindly assist

Mango Ltd is a comprehensive, listed and accredited education provider that owns a variety of educational institutions. The company management has felt that the current market price of its shares of R100 is lower that they believe that the company to be worth. There also has market activity that suggest that a competitor is gearing up to attempt a takeover of Mango.

The company currently has the following balances on its statement of financial position

Cash R4 billion

Total other assets R2 billion

Stated capital R100 million

Retained earnings R3 billion

Total liabilities R1 billion

The management of the company wants to initiate a general share buyback in order to repurchase as many shares as possible in the open market with R1 billion of its retained earnings. Each share would be purchased for R110 in the open market. The company currently has 100 million shares outstanding of which the management and original owners together own 41% , of which none will be bought in the process.

Required:

Explain the decision to Repurchase shares. Explain how the repurchase will affect the control (current and potential future ) of the company as well as its profitability (ROE and EPS) and future financing opportunities.

Ignore any tax implications.

Thank you.